How do small and medium-sized enterprises carry out equity incentive?

In the design of equity incentive scheme, the three most important things are: setting tools, setting quantity and setting people, that is, "how to motivate, who to motivate and how much to pay". From the perspective of scheme design, SMEs also need to focus on these three aspects.

For very early domestic companies, we have always suggested adopting stock options, because there are solutions for both domestic and foreign listings in the future. However, if the previous employees hold shares, the process will be awkward, because in the subsequent development of the company, there may be people coming in and out, which will be more troublesome to deal with.

Usually, when the company is in the A round, the core team will discuss with investors the proportion of employees motivating option pool. In fact, there is not much scientific basis to consider the size of employee incentive option pool at this stage, mainly referring to market practices and the company's own shareholding structure.

The company has great decision-making power in determining the incentive object, and the market data is for reference only. If we don't stratify employees, but look at the coverage of incentive plan as a whole, the coverage of incentive objects may reach 60% or even higher for companies that start to make incentive plans from round A.